Shopify CEO Tobi Lutke is betting high on Coinbase as he added shares of worth $3 million in the last two months, as per blockworks.co. Starting August this year, Lutke has bought Coinbase stock of $369,000 on an average weekly basis. Co-founded Shopify in 2006, Lutke joined the Coinbase board in February.
Currently, the Shopify CEO acts as the director of Coinbase, which makes his liable to file trades with the Securities and Exchange Commission (SEC). As per SEC rulebook, Lutke’s investment adheres to Rule 10b5-1, which was adopted by Coinbase on May 26, 2022.
What is Rule 10b5-1?
According to Investopedia, Rule 10b5-1 of SEC allows only board members of the publicly traded corporation to buy or sell stocks using a trading plan.
Tobi Lutke’s Latest Purchases
In May, Coinbase stock was valued at $70, having reduced by 75 percent since January. In August, Lutke bought Coinbase stock $97.24 and added more to his kitty in September when the stock price fell to $62. According to the data released by SEC, Lutke bought 40,315 shares of Coinbase, worth $2,949,833 at an average price of $73.17.
In February and June, the Shopify CEO was awarded with additional stock by Coinbase. When elected to board, Lutke disclaimed beneficial ownership of 25,500 shares. As on Tuesday, Lutke owns 65,815 shares of Coinbase worth $4.28 million. However, the stock price fell to $65 on Monday, which makes Lutke suffer 12 percent of nominal loses in $330,000.
Most Confident Tobi Lutke
Lutke’s repeated investments in Coinbase is surprising insiders as well. Co-founder Fred Ehrsam is one among rare insiders who are buying Coinbase stock just like Lutke. In May, Ehrsam added 1.12 million shares of Coinbase to his kitty, spending $76.8 million on an average of $68.49 per share. With Monday’s fall, Ehrsam suffered five percent of nominal losses, which is $3.35 million.
Among insiders, it’s a common trend to sell Coinbase stock. Unlike conventional initial public offering (IPO), Coinbase cannot add new shares for trading on the Nasdaq as its liquidity must come from existing shareholders. While Lutke and Ehrsam scooped up more Coinbase stock in the recent past, early investors like Andreessen Horowitz, Fred Wilson have parted their ways with Coinbase.
Coinbase CEO Brian Armstrong, Chief Financial Officer Alesia Haas, General Counsel Paul Grewal, Chief Product Officer Surojit Chatterjee and Chief Accounting Officer Jennifer Jones are among those who sold $595,000 of company stock in the recent past. As much as 15.7 million of Coinbase shares have been jettisoned by its insiders as per SecForm4 data compiled by Blockworks. It values around $5.8 billion for an average price of $369.39.
1/ Starting today, Coinbase will begin integrating our crypto policy efforts right into our app. These will help our 103M verified users get educated on the crypto positions held by political leaders where they live. pic.twitter.com/3GqWZIioZQ
— Brian Armstrong (@brian_armstrong) September 14, 2022
Over 85 percent of Coinbase stock was jettisoned on the company’s first day of public trading. Now, Coinbase stock must rise by 450 percent to reclaim the average sale price of insiders.
Top Sellers of Coinbase Stock
Tech investor Wilson is among the top sellers of Coinbase stock. Using his own Union Square Ventures, he has generated $3.63 billion after selling Coinbase shares. Ehrsam, though purchased substantial shares in the recent past, comes on the second position among inside sellers. In 2021, he sold 1.5 million shares for $492.3 million at an average price of $328.18.
On number three, Marc Andreessen has sold Coinbase stock worth $311.2 million for an average of $294.15 per share.
Hope on Short Interest
Not all investors of Coinbase have hope for its future as much as Lutke. The microeconomic conditions have given many of its investors healthy headaches despite a steady short interest.
“Coinbase is still in the grips of a lot of recent issues, including SEC action, technical issues, terrible financial metrics (huge negative EBITDA) and fee structure,” Oisin Maher, founder of QuantX Analytics, said as quoted by blockworks.co.
“I’m not a fan of their heavy use of non-GAAP metrics in their accounting. The stock may have some short-term upside potential, but beyond that, I would prefer to stay away from it,” Maher added, hinting at how investors are now analysing balance sheets and revenue growth to decide on inflation-hit investments.
In the second quarter this year, Coinbase recorded a 63 percent fall in its revenue. The losses were valued at $1.1 billion on total of $803 million revenues. Coinbase has its hope pinned on the short interest stability, which has hovered between 24.6 million and 26 million shares in the last two months. It is valued at 17 percent of the float.
This explains why not every Coinbase insiders is as confident as Shopify CEO Tobi Lutke.
About Coinbase
Established in June 2012 by Brian Armstrong and Fred Ehrsam, Coinbase Global, Inc was founded in San Francisco, California in the United States. The company offers financial infrastructure and technology for the crypto economy in the US and across the globe.
In June 2022, Coinbase announced reduction of 18 percent of its total workforce, accounting to a total of 1,100 employees. Declining crypto prices and over-hiring were cited as the reasons behind the layoffs by CEO Armstrong. However, according to a report published by BanklessTimes.com, hiring at Coinbase has increased 33 percent despite the layoffs.
